In its attempt to suppress inflation, the Federal Reserve once again raised short-term interest rates, bringing the federal funds rate to a range of 5.0 to 5.25%. This is the highest the federal funds rate has been since 2007. Since March 2022, the Federal Reserve has increased its interest rate…
In its attempt to suppress inflation, the Federal Reserve once again raised short-term interest rates, bringing the federal funds rate to a range of 5.0 to 5.25%. This is the highest the federal funds rate has been since 2007. Since March 2022, the Federal Reserve has increased its interest rate target on the federal funds rate 10 times.
The most often used money supply measure, M2, increased from $15.38 trillion in February 2020 to $21.86 trillion in March 2022 — an increase of 42%. Unsurprisingly, inflation began to be a problem, rising to a level not seen in four decades, as output was not growing at near that rate. Then the money supply began to decrease, with M2 now having fallen by $885 billion or 4.1% since July 2022. As a result, we have seen a decline in inflation. The annual U.S.
The Federal Reserve also subscribes to the idea that increases in wages cause inflation. An increase in productivity or a reduction in the supply of labor, however, will result in wage increases. Rather than heralding the unemployment rate being at its lowest level in 50 years, the Federal Reserve views this as a driver of inflation.
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